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Alternative Methods for Interpolating PPPs

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  • Diewert, Erwin
Abstract
The paper draws on a previous paper by Diewert and Fox which addressed two problems: (i) how to measure aggregate real output and inflation for a group of countries and (ii) how to construct measures of real GDP for a group of countries where the country measures of real GDP are comparable across time and space. In order to address both problems, it is necessary that the group of countries construct Purchasing Power Parities (PPPs). The present paper looks at the related problem of interpolating PPPs between benchmark years when PPPs have been constructed. The paper shows that the method of interpolation that was suggested by Diewert and Fox is equivalent to a variant of the method used by the Penn World Tables to interpolate PPPs between benchmarks. The interpolation methods are compared to actual OECD PPPs for the years 2001-2017.

Suggested Citation

  • Diewert, Erwin, 2018. "Alternative Methods for Interpolating PPPs," Microeconomics.ca working papers erwin_diewert-2018-11, Vancouver School of Economics, revised 25 Oct 2018.
    • Handle: RePEc:ubc:pmicro:erwin_diewert-2018-11
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    File URL: https://econ2017.sites.olt.ubc.ca/files/2018/10/pdf_paper_diewert_DP18-07-AlternativeMethodsforInterpolatingPPPs_oct2018.pdf
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    References listed on IDEAS

    as
    1. Caselli, Francesco, 2005. "Accounting for Cross-Country Income Differences," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 9, pages 679-741, Elsevier.
    2. W. Erwin Diewert & Robert C. Feenstra, 2021. "Estimating the Benefits of New Products," NBER Chapters, in: Big Data for Twenty-First-Century Economic Statistics, pages 437-473, National Bureau of Economic Research, Inc.
    3. Diewart, W Erwin & Morrison, Catherine J, 1986. "Adjusting Output and Productivity Indexes for Changes in the Terms of Trade," Economic Journal, Royal Economic Society, vol. 96(383), pages 659-679, September.
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    8. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-177, March.
    9. Diewert, W, Erwin & Feenstra, Robert, 2017. "Estimating the Benefits and Costs of New and Disappearing Products," Microeconomics.ca working papers tina_marandola-2017-12, Vancouver School of Economics, revised 19 Dec 2017.
    10. Paul A. Samuelson, 1953. "Prices of Factors and Goods in General Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 21(1), pages 1-20.
    11. Robert Inklaar & Marcel P. Timmer, 2012. "Productivity Convergence Across Industries and Countries: The Importance of Theory-based Measurement," Chapters, in: Matilde Mas & Robert Stehrer (ed.), Industrial Productivity in Europe, chapter 11, Edward Elgar Publishing.
    12. Caselli, Francesco, 2005. "Accounting for cross-country income differences," LSE Research Online Documents on Economics 3567, London School of Economics and Political Science, LSE Library.
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    Cited by:

    1. Josh Martin & Rebecca Riley, 2023. "Productivity measurement - Reassessing the production function from micro to macro," Working Papers 033, The Productivity Institute.

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    More about this item

    Keywords

    Purchasing Power Parities; PPPs; ICP; OECD country statistics; inflation; price and volume indexes; Fisher indexes;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts

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